Andrew Curry - Brands Are Machine That Makes A Difference ADM_0613_Silver.pdf

ADMAP JUNE 2013

In 1968, the American conceptual artist Sol LeWitt began to sell the ideas for his art rather than the physical artwork. When an organisation

bought a LeWitt wall drawing, they received a certificate of authenticity, together with instructions on putting the piece together. LeWitt wouldn’t produce the art himself and so he clearly separated the finished product from the original animating idea that guided its production, summed up in the phrase: “The idea becomes the machine that makes the art.”

As with ideas and art, so with brands and businesses. In the same way that LeWitt sold detailed plans to guide the production of art, so a ‘brand blueprint’, brand vision or brand essence is meant to guide how a business behaves and communicates. When it works, the brand becomes a guiding principle that tells the business how to act. Or, to paraphrase LeWitt, ‘the brand becomes the machine that makes the difference’. When the business becomes detached from the brand, or the brand loses credibility, the business suffers.

It is a mistake to confuse a brand with a business. They are separate but connected. This mistake is compounded by the different ways ‘brand’ is used. People outside marketing often use ‘brand’ as shorthand for ‘branded business’, whereas marketers typically use it as a way to package the associations people have with a product or company into a relationship.

But brands are concepts. When we say we have a ‘relationship’ with a brand, it is just a metaphor. The question, therefore, is about untangling the relationship between brands as animating concepts, and businesses as physical manifestations of that concept and, in turn, the role brands play in shaping business purpose.

We argue it is the hum of the brand – the machine – that gives life and meaning to material forms of the business they are a part of, and makes a difference to the world beyond the business.

BuSIneSS PurPOSe

The idea that brands might be aligned to a social purpose is not new. The brand is the creation of the age of mass society, mass media and mass education dating back to the late 19th century. The

first brands, in the age of poor but improving public health, were from companies such as Pears Soap (‘used by all the best judges’) or Wright’s Coal Tar Soap (‘we’ll take this into the nursery’) that promised to do away with germs; or Fray Bentos, which promised its tins of Argentine corned beef were nutritious and hygienic. What counts as ‘social good’ depends on the values and social concerns of the time, but they have also provided a compass for action on broader social issues.

If brands are a product of the late 19th century, the modern business is far older. It goes back to the 16th century, when companies were first allowed, at least in england, to transfer the risks of enterprise from the individuals who set up the venture, to the business itself. It is one of the defining innovations of the modern world.

But what was that business for? To make money, obviously, but also for other social purposes, as a distinguished line of entrepreneurs demonstrated, from Cadbury to Lever. The founding principles of Barclays, a Quaker bank, were, ‘Honesty. Integrity. Plain Dealing’. It wasn’t just about the money.

The idea that the purpose of business might be distinct from social good is relatively recent. In 1962, the economist Milton Friedman argued in Capitalism and Freedom

E s s ay: The brand: The machine ThaT makes The difference

Brands with a purpose

The concept of businesses purely chasing shareholder value is a relatively recent – and flawed – one; those that also have a social purpose stand out more, engender loyalty and focus on the long-term health of the business

SILver AWArD WInner

THe ADMAP PrIZe

2013

BY ANDREW CURRY, THE FUTURES COMPANY, AND ANDY STUBBINGS, BACARDI

ADM_0613_Silver_2nd.indd 26 5/24/2013 12:21:57

ADMAP JUNE 2013

27

E s s ay: The brand: The machine ThaT makes The difference

that businesses should single-mindedly make money for their shareholders. By the time this narrow model reached the business mainstream, helped along by a speech by Ge CeO, Jack Welch, it found a ready audience. The concept of ‘shareholder value’ became a dominant idea in the business world from the 1980s onwards. no matter that it turned out to be wrong. We now know businesses that pursue narrow profit-maximising strategies do less well than companies with broader business goals. The economist John Kay says the pursuit of shareholder value destroys the value of a business:

“The more shareholder value became a guide to action, the worse the outcome. On the board of the Halifax Building Society, I voted in 1995 for its conversion to a ‘plc’. We would allow the company to pursue the goal of maximising its value untrammelled by

outmoded concepts of mutuality: in barely a decade, almost every last penny of that value was destroyed. In 1996… [I] described how ICI, for decades Britain’s leading industrial company, had recently transformed its mission statement from ‘the responsible application of chemistry’ to ‘creating value for shareholders’. The company’s share price peaked a few months later, to begin a remorseless decline that would lead to its disappearance as an independent company.”

So, while striving for social good might maximise profits, it doesn’t work the other way around. Profits are an outcome of a business generating economic and social value; they shouldn’t be used in the place of a company’s purpose or vision. In his book Charting the Corporate Mind, Charles Hampden-Turner suggests why profit is such a poor guide for a business. “Present

profitability may be the consequence of several hundred decisions taken over the past decades… Because profits are historical they are realised up to the very second that you are holed and start to sink.”

Profits look to the past, while brands look to the future. Profits look inside, to the organisation, while brands look outside, to the operating environment and the wider business context. As a result, a business that seeks to maximise profits as an end in itself is blind to its environment. Standing in the wreckage of a deep financial crisis, we know how that ended for Britain’s banks, still dealing with an aftermath of bonus excesses, money-laundering scandals, product mis-selling, and interest rate manipulation. It is hard to avoid the conclusion that the cult of shareholder value was misnamed, that it became a dominant idea because it helped

ADM_0613_Silver_2nd.indd 27 5/24/2013 12:21:59

ADMAP JUNE 2013

ADMAP PrIZe 201328

enrich, instead, its senior executives, through share options and similar devices. There is nothing so popular as a theory that makes its adherents millions of dollars richer.

SOCIAL PurPOSe

In summary, there are three main ways being a ‘force for social good’ makes a business more successful. First, it inspires people to work there and gives them a sense of purpose. Second, it makes businesses stand out to consumers in otherwise mundane categories. Finally, it helps a business take a longer-term view of what it needs to do to remain successful. In each, the role of the brand is fundamental.

You don’t have to work for a profit-maximising firm for long to discover that, for most people, it is not a pleasant or inspiring place to be. James Collins and Jerry Porras point out in their paper on building company visions that “a key role of core purpose is to guide and inspire. ‘Maximize shareholder wealth’ does not inspire people at all levels of an organisation, and it provides precious little guidance.”

In Millward Brown’s BrandZ study, brands that over-index on purpose and commitment, representing businesses that appear to have a purpose beyond profit, have increased 87% in value in five years, roughly twice as fast as those that don’t. Jim Stengel (former CMO of P&G) put together with Millward Brown a basket of 50 of the most ‘purpose-driven’ brands, and found they outperformed the uS S&P 500 by almost 400% (January 2011).

While it is easier to pick winners selectively after the fact, it is hard to read through the ‘Stengel 50’ and not identify the common factor in brands like Google, innocent, Method or Zappos – they are all aligned with a broader social intent. There are different ways for a business to be a ‘force for good’: innocent finds ingenious ways to deliver fresh fruit and vegetables; Method makes cleaning less dirty and embarrassing. Crucially, this intent is also a strategic force: Google wanting to organise the world’s information is not a CSr footnote; it dictates how it behaves.

The principle also operates for less well-known companies. Southwire manufactures wire and cable in Georgia, uSA, and has stayed profitable in a fiercely competitive industry by remaining true to its values of supporting and developing its

workforce. When the local high school wasn’t producing the workforce it needed because of a 40% dropout rate, it partnered with local schools, employing the most at-risk students part-time and mentoring their academic performance. nearly all the students in this programme completed high school, and a third went on to become Southwire employees.

The second benefit of being a force for good is that it makes a business or product stand out. Looking from the inside out, it is easy to overestimate our consumers’ depth of emotional attachment and loyalty to brands. This is especially the case in everyday categories where consumers spend only a few seconds on purchase decisions. In developed markets, they expect all the products to do the job. However, they do care about broader social issues, such as unhelpful images of women’s beauty or an overly protective culture of child development. Dove’s Campaign for real Beauty or Persil’s Dirt is Good campaigns were successful because they address contemporary social contradictions that are more interesting, and more important, than soap or detergent per se.

An example, from Brazil, is beauty brand O Boticário. The top three domestic beauty brands in Brazil, including O Boticário, all grew faster than their multinational competitors between 2006 and 2010, in large part because the emerging Brazilian middle class identifies more with them as it negotiates the transition between growing wealth and maintaining pride in Brazil’s heritage. The company is well known for its 800 Brazilian conservation projects and local social programmes, which emphasise

its investment in local areas.Thirdly, businesses that strive to be a

‘force for good’ tend to have their eye on a longer-term future. Academics such as Michael Porter have argued that what is good for society is good for business. Over the longer term, for large businesses, this is true. The future of internationally established business, such as unilever, is so intertwined with the future of the planet and its resources that it makes complete sense for it to commit to ambitious sustainability goals. Its previous, more resource-intensive business model gives it little chance of long-run success in a more resource-starved world.

There are risks in taking a bold stance on social issues: people might not believe you. even before the arrival of the internet and digital media, consumers could sniff out an uncommitted brand. now, they also tell their entire social graph. When Coca-Cola launched a campaign in the uS earlier this year about obesity, it received praise in some quarters initially, but appears since to have drawn a greater share of negative attention. Once again, we see that businesses that interpret ‘a force for good’ as being about reputation management rather than strategy are unlikely to be credible in consumers’ minds. As a result, Coke’s obesity initiative has faltered.

It is hard to argue with the evidence that businesses with purpose do better. Being a ‘force for good’, or setting out to make a difference, is also good for profits. until a generation ago, it would have seemed obvious, for the notion that the two ideas are antithetical is a relatively recent invention.

Businesses should see their brands as machines that give them vision, that let them sense their environment and stand out from the crowd. Brands, used in the right way, shape a firm’s strategic direction, inspire its workforce and distinguish its products and services. now more than ever, in the depths of the worst global recession for 80 years and with sustainability and resource concerns rising, business leaders must set their controls so the machine can make the difference.

It makes a well-evidenced argument that brands that have a social purpose become a machine that drives a business to greater heights than it would otherwise attainGareth Kay, Admap Prize judge

ADM_0613_Silver_2nd.indd 28 5/24/2013 12:21:59